Related papers: A model-free approach to continuous-time finance
We investigate whether it is possible to formulate option pricing and hedging models without using probability. We present a model that is consistent with two notions of volatility: a historical volatility consistent with statistical…
In this paper, we consider the functional It\^o calculus framework to find a path-dependent version of the Hamilton-Jacobi-Bellman equation for stochastic control problems that feature dynamics and running cost that depend on the path of…
The do-calculus is a well-known deductive system for deriving connections between interventional and observed distributions, and has been proven complete for a number of important identifiability problems in causal inference. Nevertheless,…
This paper addresses the portfolio selection problem for nonlinear law-dependent preferences in continuous time, which inherently exhibit time inconsistency. Employing the method of stochastic maximum principle, we establish verification…
A continuous-time Markowitz's mean-variance portfolio selection problem is studied in a market with one stock, one bond, and proportional transaction costs. This is a singular stochastic control problem,inherently in a finite time horizon.…
We extend the fundamental theorem of asset pricing to a model where the risky stock is subject to proportional transaction costs in the form of bid-ask spreads and the bank account has different interest rates for borrowing and lending. We…
A peculiar feature of It\^o's calculus is that it is an integral calculus that gives no explicit derivative with a systematic differentiation theory counterpart, as in elementary calculus. So, can we define a pathwise stochastic derivative…
We consider a financial model with permanent price impact. Continuous time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of super-hedging a European option. Our main result is the…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
In timeline-based planning, domains are described as sets of independent, but interacting, components, whose behaviour over time (the set of timelines) is governed by a set of temporal constraints. A distinguishing feature of timeline-based…
Discrimination between non-stationarity and long-range dependency is a difficult and long-standing issue in modelling financial time series. This paper uses an adaptive spectral technique which jointly models the non-stationarity and…
We propose a method for inferring the conditional indepen- dence graph (CIG) of a high-dimensional discrete-time Gaus- sian vector random process from finite-length observations. Our approach does not rely on a parametric model (such as,…
We investigate the portfolio selection problem for an agent with rank-dependent utility in an incomplete financial market. For a constant-coefficient market and CRRA utilities, we characterize the deterministic strict equilibrium…
This paper proposes a simple technical approach for the analytical derivation of Point-in-Time PD (probability of default) forecasts, with minimal data requirements. The inputs required are the current and future Through-the-Cycle PDs of…
In this paper we introduce a new methodology to determine an optimal coefficient of penalized functional regression. We assume the dependent, independent variables and the regression coefficients are functions of time and error dynamics…
The continuous time model of dynamic asset trading is the central model of modern finance. Because trading cannot in fact take place at every moment of time, it would seem desirable to show that the continuous time model can be viewed as…
We propose a method for inferring the conditional independence graph (CIG) of a high-dimensional Gaussian vector time series (discrete-time process) from a finite-length observation. By contrast to existing approaches, we do not rely on a…
Instrumental Variable (IV) provides a source of treatment randomization that is conditionally independent of the outcomes, responding to the challenges of counterfactual and confounding biases. In finance, IV construction typically relies…
In this note we analyze a model for a unidirectional unsteady flow of a viscous incompressible fluid with time dependent viscosity. A possible way to take into account such behaviour is to introduce a memory formalism, including thus the…